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What do we really mean by supply chain management?
Over the years many buzzwords have emerged in the field of logistics, with "supply chain management" (SCM) and all its variants being the most common examples. There is nothing new in these terms. Logistics management is still a developing discipline, and natural development over time does not equate to truly new concepts.
Nevertheless, researchers continue to discuss and debate the meaning of the term supply chain management. Every new book about logistics, it seems, contains another definition of SCM. To me this is an absurd situation, because there is nothing truly new, even if we do give it a new name or definition.
According to the academics Lambert and Stock1 and others, the definition of supply chain management is much broader than that of logistics. This is a common argument. For example, the Council of Logistics Management (CLM) (now the Council of Supply Chain Management Professionals) revised the definition of logistics in 1998:
Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point-of-origin to the pointof- consumption in order to meet customers' requirements.
Lambert, Cooper, and Pagh offered the following definition that same year2:
Supply chain management is the integration of key business processes from end user through original suppliers that provide products, services, and information that add value for customers and other stakeholders.
That definition covers most business activities. Christopher's definition3 is more customer-focused:
The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.
The standpoint that logistics management is more internal than supply chain management strikes me as somewhat strange given that integration between different players has always been fundamental to logistics management.
To illustrate how the definition and concept of supply chain management have multiplied, consider that in 1999, 30 papers were presented at a conference, resulting in at least 20 different variations on the SCM theme.4 These included:
- Supply chain network
- Supply management
- Capacity-based supply chain
- Supply chain dynamics
- Networkwide supply chain
- Lean supply chain
- Supply network
- Web supply chain
- Supply demand
- Seamless supply chain
- Supply integration
- Demand chain
- Information management
- Supply coalitions
Similarly Day, Burnett, and Forrester5 found that the term "supply chain management" was frequently used but the concept had inherited a multiplicity of meanings—in other words, there were disagreements about what definition best describes SCM. They also found that literature surveys create more confusion than general agreement on a definition.
Here are some examples of how fragmented the definitions have been. Olsen and Ellram's definition6 had a broad discussion about the "buyer-supplier relationship." New7 argued that supply chain management crosses boundaries between operations and industrial economics, marketing, economic geography, and industrial sociology. (Under that description, supply chain management includes nearly everything in business—hardly a meaningful definition.)
Another definition was that of Mattsson,8 who said the supply chain consisted of a line of actors who are in a dependent relationship with one other, and through which material, payment, and information flow. But this could also be seen as a traditional defi- nition of logistics.
SCM is what you make of it
All of these variations and the lack of clarity in the definition lead to the conclusion that SCM is what you make of it; in other words, it can involve anything, depending on the situation. In that view, it is hardly a new theory, nor is it a new scientific field.
Leaving aside the discussion of the proper definition of SCM and its relationship to logistics for a moment, let's look more closely at the concept itself and its possible advantages. The supply chain concept extends to include a focus on production and involves both the supply and distribution sides of the company. As the chain expands, the distance between the manufacturer and the end consumer increases, both geographically and from an operational point of view. At the same time, there is a strong trend toward more and more customer-oriented products and production, which requires close relationships between suppliers and customers.
This trend points out the need for a form of supply chain or, more generally, a system for integration and closer relationships. But is the "supply chain" concept the solution to this challenge? A chain of companies is only a part of a whole, complex system. There has to be a focus on all of the relationships and the dependencies, which is a big challenge indeed.
Currently, SCM research is dominated by information technology (IT)-related projects that often involve IT-based modeling and simulation. As a result, SCM consultants and researchers are building models in one limited field, often without a deeper knowledge of established theory, practical usefulness, economic benefits, or the effects of their developments on the system as a whole.
In today's world, businesses are shaped by complexity, fast-changing conditions, and constant development. This causes instability in many respects, but is this situation really new? Have not people in all periods of history thought that their own times were more dynamic and more changeable than any before them? Today, however, we can better predict change than we could in the past. This means that we can control development and that the rate of development is low today compared to previous periods.
Companies are trying to respond to dynamic developments and complexity, striving to achieve stability and to carry out operations more efficiently. The goal of IT development, to a great extent, is to create a better (which often means simpler and easier) way to conduct business.
In this dynamic world, we create new theories and new concepts such as supply chain management. What are the criteria for the new theories, and how are new conceptions related to them? Sometimes it seems that the degree of popularity—how often it is used, mentioned, or referred to—is the determining factor.
What kind of chain?
If we want to keep the "chain" concept, then the most appropriate name might be "value chain." But in some respects, it would be more correct to call the supply chain the "demand chain." One important reason is that demands for more effective support often come from customers. A discussion about supply and demand, moreover, leads to the conclusion that all actors in the supply chain can be seen both as customers and suppliers, depending on the position from which you view the chain. Regardless of the viewpoint, the end of the chain is always the final customer.
If we treat the supply chain as a theory, we can compare it with other theories and draw some conclusions. For instance, the marketing channel theory focuses on the distribution and demand side of a company; it can be argued that this is only part of the chain, but this depends on where the company is situated in the chain. The value chain primarily focuses on internal activities and physical flows, so that support activities are related to external activities. In comparison with supply chains, the value chain pays very little attention to information systems. The network theory considers the whole network, its actors, activities, and relationships. The supply chain is only one part of a network, and therefore it only gives us one part of the entirety. Finally, the business logistics theory includes the whole material flow and the different activities within it. Business logistics does not focus on integration and the information system in the same way that the supply chain concept does. In logistics, information systems are natural and necessary tools for managing the flow in all its aspects; it is not the major management focus that it is in the supply chain theory.
It is quite possible to compare and find differences between the supply chain concept and established concepts. Yet isn't the supply chain concept a result of striving for new ideas—ideas that contain very little in the way of substantial new facts? In fact, we could just as well call supply chain management "cash flow management" or "information management."
It should be obvious to anyone that I have a reserved attitude towards new concepts, and in my logistics research world, I believe that this is a healthy approach.
1. Douglas M. Lambert and James R. Stock, Fundamentals of Logistics Management (New York: McGraw-Hill, 1993).
2. Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, "Supply Chain Management: Implementation Issues and Research Opportunities." The International Journal of Logistics and Management (1998).
3. Martin Christopher, Logistics and Supply Chain Management. (London: Prentice Hall, 1998)
4. Leif Enarsson, "Supply Chain Management: Just a Simple System, or a Determining Solution?" Paper given at the 15th International Conference on Production Research, University of Limerick, Ireland (1999).
5. Marc Day, John Burnett, and Paul Forrester, "Assessing Control Sspects in U.K. Ceramic Tableware Supply Chain." Paper presented at the 15th International Conference on Production Research, University of Limerick, Ireland (1999).
6. Rasmus F. Olsen and Lisa M. Ellram, "Buyer-Supplier Relationships: Alternative Research Approaches," European Journal of Purchasing & Supply Management (1997).
7. Steve New, "Supply Chains: Some Doubts." Paper presented at the International Purchasing and Supply Education and Research Association, Cardiff, United Kingdom (1994).
8. Stig-Arne Mattsson, "Effective Material Flow in Supply Chains Through Integration." Paper presented at the Federation of European Production and Industrial Management Societies (FEPIMS) Conference, Helsinki, Finland (1998).
Editor's Note: This article is an edited excerpt from Future Logistics Challenges, (ISBN 9788763001700). The book can be purchased for UK £36, US $64, or EUR 53. For more information, go to International Specialized Book Services (www.isbs.com) or visit the Copenhagen Business School Press web site, www.cbspress.dk. Reprinted by permission of the publisher.
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